Strengthening Corporate Outlook Boosts Saudi Business Conditions

According to a survey of Saudi Arabia’s non-oil private sector, the condition of business in the country improved a bit in February, compared to the historic lows of the previous month.

The survey suggests that the non-oil sector of the United Arab Emirates will develop at a quicker rate in 2018, as the government increases spending on both public sector wages and infrastructure projects.

The Index of the Emirates NBD Purchasing Manager increased to 53.2, a slender uptick on January’s measure of 53, the lowest level since analysis began in 2009. A reading below 50 shows a reduction, while above 50 shows growth.

The country’s new order growth slackened severely the previous month, with a measure of 52.9, which marks the lowest level in the history of the survey.

Though recent business conditions are quiet, the viewpoint for future growth prospects increased, attaining its utmost point since April 2014.

Head of regional research at Emirates NBD, Khatija Haque said while the speed of growth in the Kingdom’s non-oil sector was sluggish by historical standards in February, companies were much more happy about predictions for the coming year, citing new project wins and stronger growth prospects.

The most recent reading comes after the introduction of a new VAT and resulting price hikes at the beginning of the year.

Middle East economist at Capital Economics, Jason Tuvey said that these dynamics contributed to both the rise in inflation and a decline in economic conditions, both of which has eroded the consumer spending for households.

Tuvey pointed out in a research note that firms seem to be responding by engrossing some of the effect of the losses in their profit margins instead of passing it on to consumers.

Firms in the Kingdom reduced selling prices in February by the most in the history of the survey in reaction to fading demand, according to the ENBD PMI survey.

Tuvey said that a rise in government infrastructure spending will be the key driver for future development in the non-oil sector.

PMI readings so far recorded this year were probably in reaction to the rapid rise in activity and purchasing in the final quarter of 2017, ahead of January’s VAT introduction, according to the survey.

The report said that they expect this to be a temporary phenomenon and anticipates the recovery of the PMIs the next couple of months.

Elsewhere, the United Arab Emirates’ PMI dropped for the second consecutive month in February.